Pass through Sub-Comp
When a composition is used as a source for a layer in another composition, we call this layer a sub-composition, or sub-comp for short. It's just a matter of naming, so keep in mind that these two compositions are the same type.
This sub-comp contains several layers, and some of them can be sub-comps too. By default, you can assume that Autograph will render the content of this sub-comp first and composite the resulting image in the stack of the "main" comp.
Under the hood, more complicated things happen because all transformations applied to this sub-comp will be sent to all its content to avoid rasterization, if the user asks for it; but, let's set this aside for the moment. For more information on composition and sub-composition behavior, please refer the dedicated section.
Once this resulting image is calculated, it will be blended using the blend mode defined by the layer. Blend modes of all layers in this sub-comp will only be used by this "pre-render" of the resulting image. They will not go beyond the barriers of the sub-comp. That's because the Pass-Through Sub-Comp is turned OFF by default. The sub-composition acts like a closed box, only exposing the resulting image of what's inside.
If you turn this switch ON, the box is now "open" and the blending mode of the layer using the sub-comp is now grayed out because it’s irrelevant/unused.
All blending modes of all sub-layers will act as if they are in the main composition and not in a sub-comp. That is one of the parameters that differentiates a sub-comp and a group of layers. Similar concept, but different applications.
To know more about this difference, please refer to the Grouping layers section.